TAIWAN 2020 ASIA’S MUTUAL FUNDS GIANT

Markets and Securities Services

TAIWAN 2020 ASIA’S MUTUAL FUNDS GIANT

Markets and Securities Services | Taiwan Mutual Funds 2020 2

CONTENTSIntroduction 3

Chapter 1. Taiwan, the perfect demographics for mutual funds 4

Chapter 2. The Taiwan mutual funds industry 7

Chapter 3. Distribution dynamics 20

Chapter 4. Master Agents 28

Chapter 5. An evolving regulatory environment 32

Chapter 6. What future opportunities are there? 34

Summary 37


2019 was a momentous year for the fund management industry in Taiwan, with many changes and developments occurring. Domestic funds once more exceeded the aggregate AUM of offshore funds, for the first time in many years, as both Exchange Traded Funds (ETF) and Target Date Funds (TDF) successfully captured a significant volume of the net new inflows to the market.

Although the number of players in the market didn’t change much, it was the impact of regulatory changes in 2018 that were most felt by the fund managers. They were alert to the need to continue to provide ETFs that matched the liability requirements of insurance companies. They also saw how TDF were able to both meet a perceived market demand for longer term products, but were sufficiently short term for end investors to consider using them. TDF were particularly successful in being used in conjunction with investment linked insurance schemes (ILAS).

Taiwan’s regulators made a few changes during the year and expressed increased concerns on the narrow investor base of most of the new ETFs launched. This was because many only had their single insurance company sponsor/client as an investor. These ETF providers will likely need to find ways to broaden the end-clients of their products, perhaps by having other Asian region insurance companies buy.

On the political front, China and Taiwan continue to have their differences, but there are few restrictions on business. There are many Taiwanese-owned businesses located in China, which helps to greatly improve the dialogue between both sides. It’s said that more than two million Taiwanese now live and work in Mainland China. The frequency of daily flights across the 160 kilometer-wide Taiwan Straits between Taiwan and more than 10 cities in China has risen from zero 10 years ago to over 20 a day now, and it’s growing every year. Mainland Chinese are second only to Japanese in numbers of visitors to Taiwan, at nearly five million a year.2

For the fund and asset management industry, Taiwan offers opportunities across institutional and retail markets. Taiwan’s institutional investors, pension funds, insurance companies and state institutions have continued to grow and have now become significant holders of offshore investments in global markets across all sectors.

The aggregate size of the Taiwan mutual funds market was reported to exceed US$350bn at the end of December 2019.3 This was made up of US$121bn in offshore funds, US$133bn in onshore local funds and US$62bn in other investment mandates from pension funds and other investors. There was a further approximate US$55bn in ETFs.4 By any standards, this makes Taiwan a location of prime importance to the fund management industry globally.

The Taiwan institutional market has also grown substantially over the last 10 years. This is split between national pension funds, insurance companies and others. It’s estimated that the current size exceeds US$300bn, of which the five national pension funds exceed US$150bn. A high proportion of the assets are invested globally, and they also use hedge funds and other alternative investments, giving many opportunities to institutional fund managers.

Below we provide an outline of the mutual funds industry in Taiwan, covering size and scale, key facts, who the leaders in the market are and what’s distributed, but also providing some brief coverage of the institutional market, which by its nature is less transparent than the regulated retail funds business, and guidance to those who wish to enter the market.

TAIWAN 2020: ASIA’S MUTUAL FUNDS GIANTFor many years, the biggest secret of the Asian mutual funds industry was the size of Taiwan compared to the rest of Asia. While it’s relatively easy to get set up in Hong Kong, taking the 83-minute flight north to Taipei has often been regarded as being too difficult (indeed the air route was named the World’s Busiest for three years running from 2014 to 2017).1

1 “Hong Kong-Taipei, World’s Busiest Airline Route 3 Years In A Row, Why?”, IATA, last accessed at https://english.cw.com.tw on 25 January 2018.2 “Taiwan Passengers Up 8.8% in 2017: China Airlines Remains Largest Carrier; Japan Is Top International Market”, OAG Schedules Analyzer, last accessed from

www.anna.aero on 25 January 2018.3 SITCA, December 2019. Note US$1 = NT$30.7.4 TWSE/Yuanta, December 2019.



a. Taiwan demographicsCompared to virtually all other markets in Asia, Taiwan has near-perfect demographics for the mutual funds industry. There’s a large middle-aged, middle-class population, with high average earnings, a high savings rate, modest pension provision and a desire to invest and actively manage money overseas rather than retain it in the home market.

Some key economic statistics for Taiwan also helps to convey why the location is so attractive.5 GDP per capita is US$24,316, having grown at an average rate of 2.06% a year over the past five years. Unemployment is 3.80% of the 23.5m population. And inflation is a low 1.2%.

Although marginally higher than Hong Kong, Singapore, Japan and South Korea, Taiwan also has one of the lowest birth rates in the world at 8.26 per 1,000, which has led to a rapidly aging population.6

Taiwan has a highly export-oriented economy, although it’s vulnerable to fluctuations in world demand. China is its biggest trading partner, representing 42.5% of total exports and 19.2% of total imports.7 Taiwan has also been a major investor into the development of China’s economic growth. Main industries in Taiwan include electronics, communications and information technology products, petroleum refining, chemicals, textiles, iron and steel, machinery, cement, food processing, vehicles, consumer products, and pharmaceuticals. It’s the original equipment/design manufacturer (OEM/ODM) centre for high-tech products. Through both direct investment and people migration, Taiwan has especially supported technology developments, manufacturing and some other growth industries in China.

CHAPTER 1. TAIWAN, THE PERFECT DEMOGRAPHICS FOR MUTUAL FUNDS

Population pyramid and density for Taiwan (% of age of total population) 8

Population pyramid for Taiwan (end-2018), shows the number of male and female inhabitants per year of age. Currently, Taiwan’s population aged over 65 accounts for 14.4%. From around 2015, old-age dependency ratios began to climb rapidly to become among the highest in Asia and will be on par with countries like Japan and South Korea.

100+95-9990-9485-8980-8475-7970-7465-6960-6455-5950-5445-4940-4435-3930-3425-2920-2415-1910-145-90-4

Taiwan 2018 Female

1.21.2 0.80.8 0.40.4 00

Population (millions)Age GroupPopulation (millions)

Male

Inhabitants/km2

>40,000 20,001 – 40,000 10,001 – 20,000 5,001 – 10,000 3,001 – 5,000 1,001 – 3,000 501 – 1000 301 – 500 101 – 300 0 – 100


b. Investor habitsTaiwanese investors are well known for their short-termism. Typically, the average hold period of an investment into funds can be around three to six months. Often it might just be until 5% or more gain has been made. Investors have been very willing to take an active role in managing their assets, in part due to the (usual) low level of initial charges applicable to sales of funds (up to 2%) and to the desire to take short-term profit rather than wait for long-term returns that might fluctuate more. This has led to the active use of mutual funds in a way very similar to equities to achieve sustained returns.

Many fund companies have made attempts to slow down the rate of turnover activity in mutual funds by investors, some by introducing a broader selection of funds in their range, others through increased marketing efforts. By late-2019, around 30% of fund sales were made in “B” shares (of UCITS funds), which were reintroduced to the market in the previous couple of years. To date, there’s little evidence this has been successful.

Even with the popularity of high-yield bond funds over the last five years, the term of holding this type of investment by many Taiwanese investors has averaged just nine months, according to many of the managers offering these products. Even more surprisingly, issuers of regular savings plans into mutual funds also report the average hold periods to be little more than 12 months.

The Financial Supervisory Commission (FSC) has similarly attempted to reduce the extent of turnover activity in mutual funds. In the last couple of years, it introduced a restriction on the extent of sales bonuses paid by banks to their sales staff for individual fund sales, which then extended to become a ban. In future, all such commissions or sales bonuses to staff have become based on retained AUM of client/customer holdings. The aim of this was to bring about a more “advisory-” than transaction-based service for mutual funds. While most non-Taiwanese banks had already adopted this approach, local banks were impacted most.

5


During 2019, Target Date Funds (TDF) or Fixed Maturity Funds (FMF) have become one of the most successful new products on the market. These have generally been offered with a maturity date of 5 to 6 years in the future. Although it is a little too early to provide conclusive evidence, there are signs that these products are encouraging longer term investing. (See below)

It’s an interesting insight into the mind of Taiwanese investors that there’s a commonly held view in the market that because offshore funds have more liberal restrictions on how they may invest their assets when compared to local funds, this can deliver better returns, despite offshore funds generally having higher charges and management fees. A recent market survey of Taiwanese investors has found that around 60% now prefer to seek capital preservation from their investments, against 20% seeking growth.

c. Household wealth and assetsThe current range of household assets and savings rates of the Taiwanese are given in the charts below.

Long-term trends are favourable for investment assets as the savings rate has outpaced investments by 14.5%, which implies a large idle pool of cash to invest.9 As the population has aged, household savings (and assets) have increased to prepare for retirement. Two-thirds of gross national savings are by households. Household asset growth is irrespective of GDP. As household assets have grown, the top two asset classes of real estate (36%) and securities (18%) have remained the most popular. Of the 18% invested in securities, the split of investments between asset classes (13% onshore securities, 5% offshore assets) is: 87% stocks and bonds vs 13% funds.10

From 2012 to 2018, household asset growth was 5.4% CAGR. Pensions and insurance were the sectors with the highest rates of growth with CAGR at 9.8%. Real estate was second with CAGR at 6.15%.11 Unlike in the other developed mutual funds markets in Asia, the Taiwanese have embraced the concept of dollar-cost-averaging through extensive use of regular savings plans (RSPs) directly invested into mutual funds. For many, this is seen as their “pension top-up”, albeit with more flexible terms. Most fund managers active in the market offer RSPs to access their products, usually with relatively low minimum monthly contributions.

5 IMF, 2017 figures.6 National Statistics, R.O.C. (Taiwan).7 National Statistics, R.O.C. (Taiwan).8 Pyramid based on information available at www.cia.gov.

Density from Kanguole — own work, CC BY-SA 3.0, https://commons.wikipedia.org/w/index.php?curid=23511759.

9 Directorate-General of Budget, Accounting & Statistics, R.O.C.10 SITCA.11 Directorate-General of Budget, Accounting & Statistics, R.O.C.12 Directorate-General of Budget, Accounting & Statistics, R.O.C.

Household asset breakdown by category . . . National savings and investment (% of GDP) 12

Housing Offshore assets Cash and demand deposits

Time and FX deposits Onshore securities Pension and insurance Other 2007 20112009 2013 20152008 20122010 2014 2016 2017

40

35

30

25

20

15

10

5

0

Gross national savings rate Gross domestic investment rate

36%

5%

11%

12%

13%

18%

5%


The industry is judiciously split between onshore and offshore funds. The Taiwan Financial Supervisory Commission (FSC), the regulator of the industry, has made valiant efforts to encourage the development of a local asset management industry, while not stopping the growth in use of offshore funds. It has successfully balanced the ambitions of global fund managers with the need to increase the employment of local staff in all parts of the fund management food chain. Its success in doing this could make an ideal role model for regulators elsewhere in Asia with high ambition to grow their domestic asset management industries.

In absolute terms, the market for mutual funds approximately exceeds that of both Hong Kong and Singapore. Over the last 10 years, the volume invested in funds has increased substantially, despite mixed market conditions. Forecasts for the next few years remain positive but challenging, and they’re inevitably somewhat dependent on continuing to achieve positive returns.

During 2019, the proportionate split between onshore (i.e. local) mutual funds and offshore funds moved back in favour of the onshore variety for the first time in many years. This has occurred as a result of the great success achieved from sales of ETFs and TDF, both of which are regarded as local products.

It can be expected that this situation may continue for a few more years, as more global fund managers set up local funds to comply with the enhanced and favourable regulations applicable to local funds and their managers.

CHAPTER 2. THE TAIWAN MUTUAL FUNDS INDUSTRY

Table 2.1 12-year growth of Taiwan mutual funds market (US$bn) 13

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

85.0 132.7 140.3 127.4 146.5 157.2 168.0 160.5 162.6 196.5 187.3 254.2

12 year growth of Taiwan mutual fund market

20112009 2013 20152008 20122010 2014 2016 2017

300

200

100

0 AuM (US$bn)

2018 2019


a. Taiwan local funds and managers (Securities Investment Trust Enterprises or SITEs)Taiwan has a well developed local fund management industry that operates alongside offshore funds. Local managers offer funds that invest into the Taiwan stock, bond and money markets, and also funds that invest internationally. Money market funds have been a particular feature and have proved very popular with corporations and insurance companies as an alternative to provide daily liquidity and earning interest. This has been due to the loose New Taiwan dollar supply and some banks that refuse to take on large sums of deposits or offer lower deposit rates for amounts more than NT$3m, leading investors to be attracted to higher rates and liquidity available via the funds.

In the last five years, local fund managers have also rapidly increased the number of ETFs offered. These have been popular with retail and insurance company investors (see below), but for entirely different reasons.

Local funds in Taiwan have had a very different profile to offshore funds. Among local funds, money market-type sectors were consistently among the most popular with retail investors together with equity and fixed-income sectors. ETF usage has increased rapidly in the last five years, although retail investors haven’t been strong supporters (see table 2.6). In 2019 however, the success of TDF has demonstrated that local investors are willing to buy funds that appeal to their investment needs regardless of whether they are managed locally or globally. With the advent of major global fund managers who generally aim to offer local Taiwan funds that are equivalent to their successful international/global offerings, this has improved the domestic opinion of the area.

Previously, the local funds market was primarily used for domestic investing, however, as the impact of regulatory changes occurs, more domestic funds are being created and these are investing globally.

Table 2.3 Taiwan local funds with split of assets between major market sectors 15

Type 2013 2014 2015 2016 2017 2018 2019

Equity 27.9% 27.2% 23.1% 22.9% 25.1% 19.0% 14.5%

Money Market 41.8% 38.4% 45.8% 40.6% 34.3% 27.0% 20.0%

Fixed income (incl. TDF) 13.7% 13.5% 9.6% 10.8% 13.1% 13.9% 15.4%

Fund of Funds 5.6% 6.9% 5.8% 6.0% 6.6% 5.5% 3.8%

ETFs 7.1% 8.2% 9.2% 12.2% 14.4% 28.2% 41.7%

Index Funds 0.6% 0.6% 0.8% 0.6% 0.8% 0.7% 0.4%

REITS 1.1% 1.0% 0.9% 1.0% 0.6% 0.4% 0.3%

Other 2.2% 4.2% 4.8% 5.9% 5.1% 5.3% 4.0%

Onshore 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Table 2.2 Taiwan local funds 14

Number of managers 39

Number of funds 978

Domestic Equity 127

Bond, Fixed Income 55

Balanced 55

Money Market 55

ETFs and Index Funds 225

Overseas Equity 197

Overseas Bond & FI (incl. TDF) 132

Fund of funds 85

Others 47

Assets Under Management US$133.0bn


Table 2.4 Listing of active Taiwan SITE by onshore fund size, market share and number of funds 16

Rank Name No. of funds AUM (NT$bn) AUM (US$bn) Market share (%)

1 Yuanta SITE 85 552.1 18.3 13.79%

2 Cathay SITE 66 385.6 12.8 9.63%

3 Capital ITC 63 373.1 12.4 9.32%

4 Fuh Hwa SITE 68 289.0 9.6 7.22%

5 Fubon AMC 64 279.0 9.3 6.97%

6 CTBC Investments 25 230.5 7.7 5.76%

7 KGI SITE 30 169.2 5.6 4.23%

8 Pinebridge IM 23 125.4 4.2 3.13%

9 Allianz Global Inv. 26 115.0 3.8 2.87%

10 JP Morgan AM 30 103.0 3.4 2.57%

11 First SITE 29 102.1 3.4 2.55%

12 Eastspring SITE 29 98.1 3.3 2.45%

13 Nomura AMC 53 97.2 3.2 2.43%

14 Invesco Taiwan 22 96.8 3.2 2.42%

15 Taishin SITE 26 93.7 3.1 2.34%

16 Mega IIT 20 92.4 3.1 2.31%

17 Franklin Templeton SinoAM 27 85.0 2.8 2.12%

18 Jih Sun SITE 19 78.3 2.6 1.96%

19 Shin Kong ITC 27 74.5 2.5 1.86%

20 Uni-President AMC 26 73.7 2.4 1.84%

21 Prudential Financial 29 73.5 2.4 1.83%

22 AllianceBernstein Inv 11 71.1 2.4 1.78%

23 Schroder IM 18 64.4 2.1 1.61%

24 TCB SITE 11 44.7 1.5 1.12%

25 Hua Nan ITC 16 36.2 1.2 0.90%

26 SinoPac SITE 25 31.6 1.0 0.79%

27 Manulife AMC 20 31.2 1.0 0.78%

28 Union SITE 13 29.2 1.0 0.73%

29 HSBC Global AMC 19 22.2 0.7 0.55%

30 Amundi Global 5 14.9 0.5 0.37%

31 Aberdeen Standard Inv. 4 11.4 0.4 0.29%

32 FIL SITE 6 11.2 0.4 0.28%

33 UOB AMC 4 11.2 0.4 0.28%

34 Deutsche Far Eastern AMC 5 9.9 0.3 0.25%

35 JKO AMC 11 8.4 0.3 0.21%

36 Neuberger Berman SITE 4 8.1 0.3 0.20%

37 Reliance SITE 6 4.4 0.1 0.11%

38 UBS Global AMC 4 4.0 0.1 0.10%

39 BlackRock IM 9 3.2 0.1 0.08%

Total 978 4,004.6 133.0 100%


As can be seen from the preceding chart, the market’s somewhat fragmented. There are many participants who have negligible market share, yet remain active. Some are relatively recent market entrants, but for others it can be assumed either that they believe there will be growth opportunities for their businesses or that they may be a candidate for acquisition by a foreign player wishing to get into the market.

During 2017 and 2018, a number of foreign-owned SITEs also changed ownership. Often this too was as a result of scale issues, the existing owner failing to reach an economic size, selling to a new foreign owner perhaps with greater resources, wishing to enter the market and/or having an ambitious outlook.

b. ETF products and providersETFs have begun to capture a significant market share of assets. The AUM of listed ETFs has increased from US$4.5bn in 2013, to NT$723bn (US$55bn) in December 2019. The number of local providers of ETFs has increased from four to 14 over the last five years. The number of issued ETFs has also increased, from 19 to more than 200. There are no global or Asia-Pacific regional issuers of ETFs currently offering products in Taiwan yet.

The popularity of ETFs has increased. However, as it has elsewhere in Asia, the use of ETFs by major fund distributors such as banks and other financial services firms has been limited owing to a lack of commission rebates payable.

In 2015, the Taiwan FSC enabled the development of leverage/inverse (L/I) ETFs/products. After a slow start, these became very popular with local investors and a number of regional hedge and alternatives funds keen to capture the type of returns that could be generated by the very short-term nature of the investment provided by L/I products. At one time, these L/I products regularly achieved more than 25% of the average daily turnover on the Taiwan Stock Exchange. However, the aggregate volume of ETFs traded has now settled down to a more modest 5% to 6% of average daily trading volume. Of the top 10 ETFs by AUM, four are L/I products, which have proven to be popular with local retail investors and hedge and alternatives funds managers across the Asia-Pacific region.

Table 2.5 Market share analysis 17

Market share %

Top 10 SITEs 65.48%

Top 15 SITEs 77.66%

Markets and Securities Services | Taiwan Mutual Funds 2020

c. The Formosa Bond storyFormosa Bonds were first issued in 2006 but only became successful from 2014. These are foreign currency issues listed on the Taipei Exchange by non-domestic companies in Taiwan. In 2017, there were over 500 issuances of such bonds with an outstanding value worth over US$150bn.19 They represented an attractive investment for life insurance companies seeking to gain yield through foreign bonds. As these were listed/issued in Taiwan, they didn’t count towards any restrictions that might have been imposed by the Insurance Bureau of the FSC on the proportion of assets insurance companies could invest outside Taiwan. Thus some of the local insurance companies invested as much as 50% or more of their assets in Formosa Bonds. However, in 2017, the Insurance Bureau indicated it planned to scale back and, in November 2018, the Insurance Bureau amended the relevant regulations and included investments in Formosa Bonds into the calculation of foreign investment cap. As a result, a number of the leading insurance companies have sought to have ETFs created, listed in Taiwan and invested into foreign corporate bonds as an alternative to the Formosa Bonds. Taiwan-listed ETFs buying foreign corporate bonds are growing in excess of 30% per month with aggregate inflows of US$6bn in their first year, and are forecast to generate US$40bn in cumulative inflows before the end of 2020, at the current rate of growth.

Table 2.6 Taiwan-listed ETFs 18

SITE issuerNo. funds onshore only invested

No. funds incl. offshore investing

No. leverage/inverse included in list

AUM (US$m) Market share

2018 2019 2018 2019

Yuanta 12 26 8 10,377 14,437 44.03% 26.02%

Cathay 3 31 10 3,623 8,407 15.37% 15.15%

Capital 2 16 2 3,469 7,950 14.72% 14.33%

Fubon 10 33 12 3,585 7,857 15.21% 14.16%

CTBC — 13 1 14 5,946 0.06% 10.72%

KGI — 12 0 512 4,525 2.17% 8.16%

Fuh Hwa 1 17 2 1,874 4,205 7.95% 7.58%

Shin Kong 1 8 0 30 1,616 0.13% 2.91%

SinoPac 1 6 0 5 266 0.02% 0.48%

Taishin — 6 1 48 154 0.20% 0.28%

First 1 3 0 10 73 0.04% 0.13%

Franklin SinoAM — 2 0 — 18 — 0.03%

Mega 2 0 1 18 16 0.08% 0.03%

Uni-President — 2 0 8 11 0.03% 0.02%

Total 33 175 37 23,571 55,482 100.00% 100.00%

11


Regulations impacting Taiwan insurers’ foreign investments 20

Foreign Asset % (including Formosa bond) 2012-2017Taiwan insurers allocate more funds into foreign investments

Year Event

2005 TPEx launches international bond OTC market.

2014 FSC amends relevant regulation to encourage Taiwan insurers investing on FCY-denominated international bonds listed on TPEx (Formosa bond), where insurers don’t need to include investments in the bond into foreign investment calculations.

2017 FSC imposes restrictions on relevant regulation to cool down Taiwan insurers investing in the bond.

2018 FSC amends relevant regulation on insurers’ calculations, where new foreign investment cap = 65.25% (bond included).

1. Cathay Life, Nan Shan Life, Fubon Life and China Life are 45%; Shin Kong Life and Taiwan Life , 43% and 40% (Industry estimates).2. Possible max foreign investment limit = foreign investment limit + international bond + foreign policy reserves * 25%.3. New foreign investment upper limit = 145% * original foreign investment upper limit (Formosa bonds included).4. Cathay Life, Nan Shan Life, Fubon Life and China Life are 65.25%; Shin Kong Life and Taiwan Life , 62.35% and 58% (Industry estimates).5. Possible max foreign investment limit = foreign investment limit + Formosa bond + foreign policy reserves * 35%.

Foreign investment limit (45%) 1

Formosa bond

Available funds (100%)

Foreign policy reserves *25%

Possible max foreign investment limit 2

Original foreign investment upper limit

Previous rule

Foreign investment limit + Formosa bond (65.25%) 3,4

Available funds (100%)

Foreign policy reserves *35%

Possible max foreign investment limit 5

New foreign investment upper limit

Current rule

80%

70%

60%

50%

40%

30%

20%

10%

0%2018 20192017

Cathay Life Fubon Life Taiwan Life 1 Nan Shan Life Shin Kong Life China Life


In 2019, the FSC expressed considerable concerns regarding the extreme growth of ETFs in Taiwan, and that they seemed to often have only 2 or 3 shareholders and that there was very limited trading activity going on, on the exchange. The FSC has requested ETF product issuers to broaden their numbers of investors, and it has also imposed some time constraints by when this is required to occur. The impact of this may be to encourage the ETF product issuers to seek more institutional investors from across the Asian region, however, this might be of limited appeal whilst these ETFs have NT dollar share classes only.

d. The Hong Kong connectionThere has been an agreement in place for a number of years between the FSC and the Hong Kong Securities and Futures Commission (SFC) to enable the cross-listing and the recognition of ETFs between Hong Kong and Taiwan. Apart from Yuanta, for whom the agreement was created, few other ETF providers have made use of the agreement to cross-list products in each other’s market.

As with other Asian markets, retail fund sales of ETFs in Taiwan are sub-distributor-led, so ETFs (which don’t pay commission to sub-distributors), get very little retail shelf space. However, in 2012, one leading sub-distributor of mutual funds began an initiative to become more proactive on ETF distribution. This led to a significant increase in flows, but only to those ETFs listed on international exchanges, such as in New York, London, Hong Kong and Sydney. This continues to be an attractive use of ETFs for sub-distributors who might be globally connected. There remains still much more development to occur, but this is a market transforming quickly.

e. Target date funds (TDFs)One of the most recent developments in Taiwan has been the introduction of TDFs to the market. The first of these appeared in 2016, and by late 2019 there had been 79 funds launched, raising around US$11bn.

TDFs are designed to provide relatively lower risks (than other traditional mutual funds) by using a dynamic asset-allocation process, across the usual asset classes of equities, bonds, fixed income and money market investments, with the objective of maximising investment returns over selected time periods, which could be between three and 30 years. Generally TDFs will invest directly into securities markets. However, there are many these days that also manage assets using a range of index funds or ETFs. These have been popular with investors who perceive they provide lower costs.

In Taiwan, the majority of TDFs have been set up for three- to six-year time periods, with a high proportion invested into emerging-market fixed-income bonds, to achieve higher levels of income. Both local and global fund managers offer these products in Taiwan, with the global managers achieving greater success and for them a way in which to build up skills and assets for their local Taiwanese offices.


Figure 2.7 Taiwan onshore target date funds overview 30

During 2019 there were almost 50 new TDF launched, increasing the number to 79, from 21 fund managers. The AUM in TDF by December 2019 had reached US$10.8bn.

Number of TDF AUM of TDF (US$mn)

List of fund managers offering TDF

Name of Fund Manager

No. of TDF

AUM (US$mn) raised at launch/ 31 Dec 2019

Time frame (range) of funds

Invesco 14 2,975 4 to 10Schroders 14 2,059 3 to 6Fuh Hwa 5 879 6 to 10Eastspring 3 685 3 to 6KGI 5 681 6 Nomura 9 674 4 to 6CTBC 2 474 6 Manulife 4 369 3 to 6TCB 2 336 6 UOB 3 305 3 to 6Cathay 2 297 6 Fubon 2 216 3 to 6DWS 1 208 6 JKO 4 179 3 to 6Union 2 156 3 to 6Yuanta 1 93 4 PineBridge 1 82 6 Franklin SinoAm 1 81 6 Mega 2 80 3 Shin Kong 1 29 6 Hua Nan 1 12 4

Total 79 10,871 3 to 10

Breakdown of AUM by Currency

Denominated Currency AUM (US$mn) Market Share

USD 5,329 49.0%

CNY 2,599 23.9%

TWD 2,091 19.2%

ZAR 767 7.1%

AUD 84 0.8%

Total 10,871 100.0%

49.0%

23.9%

19.2%

7.1%

0.8%

12,000

8,000

4,000

02016 2017 2018 2019

117

1,097

4,617

10,871

80

70

60

50

40

30

20

10

02016 2017 2018 2019

13

38

1

79


f. Offshore funds in TaiwanWhile having a well developed local fund management industry, AUM in offshore funds continues to have an upward trend and offers funds that invest mainly into global stock, bond, money markets and other alternative instruments. For much of the last five years, high-yield bond funds have been a particular feature very popular with retail investors. This has been due to the characteristic, which is less seen in the structure of local funds, of expected high return while maintaining a certain level of protection over the amount invested.

For most of the last 30 years, since offshore funds began being popular with local Taiwanese investors, there has been the occasional effort made to either restrict or prevent access to the market by offshore funds. Given their level of popularity, it’s unlikely this would be able to succeed. Nevertheless, the Taiwan FSC announced its measures in 2013 aimed at slowing down the progress of obtaining a registration for new fund launches, so the rapid rate of growth of the numbers of funds did slow down. These measures, known as “The Deep Cultivation Plan” (discussed later on), serve to strongly encourage global fund managers to use their scale to build local businesses in Taiwan.

For offshore funds in 2019, by far the most popular sector for investors has been fixed income, and especially high-yield funds. Prior to the relatively recent rush into fixed-income and bond funds, Equity funds had consistently proven to be the most attractive sector for retail and institutional investors, with many chasing short-term gains before switching. Like most global mutual funds markets, the last quarter of 2019 saw a considerable slowdown in sales of funds. This is attributed to investors’ concerns on the rising interest-rate environment, a lack of direction in equity markets and a general malaise. In the event of any significant recovery in equity markets, it’s widely perceived there will be a resurgence in equity funds, over that of fixed income. This holds the potential of changing the most recent market leadership of providers of high-yield and fixed-income funds.

Table 2.8 Taiwan offshore funds 21

Number of managers 64

Number of funds 1,005

Fixed income US$62,897m

Equity US$38,843m

Balanced funds US$18,366m

Money market US$919m

ETFs US$6m

Others US$114m

AUM US$121.1bn

As at 31 December 2019, there were 1,005 (2013: 1,019) offshore funds registered for sale in Taiwan, from 64 (2013: 77) offshore fund managers. Dominant among these has been the UCITS products from Dublin and Luxembourg, which represent the vast majority of offshore funds approved for sale, although there are some US-domiciled mutual funds, too. The FSC has a clearly defined set of regulations applicable to the approval of offshore funds for sale in Taiwan, which has enabled UCITS products in particular to gain quick market access. The Deep Cultivation Plan has slowed down the influx of funds, especially from the same management group. This has led to marginally better opportunities for managers who might be new to the Taiwan market.


Nevertheless, as can be seen from the reduction in the aggregate number of offshore fund managers and from the modest increase in the number of offshore funds approved for sale in Taiwan, there has been some consolidation in the market. This has been through both mergers and acquisitions (which occurred in the global market) and also from a few small and very small global managers deciding they could no longer achieve the scale they sought from Taiwan.

In the last five years, as elsewhere in the Asia-Pacific region, fixed-income and bond funds have been very popular with local investors in Taiwan. Particularly successful have been those offering high yield. Many of the newer funds registered with the FSC for launch were high-yield or income type. This caused some concern with regulators, who, as a result, have taken strong measures to cease to allow any new high-income funds and imposed greater controls on the existing funds. Chief among their concerns was whether income is sourced from capital or the dividend income arising within the fund. It has therefore become a requirement for fund companies offering these products to clearly state the source of the income in offering and marketing documents.

Prior to this recent rush into bond and income funds, equities had been the most popular sector for Taiwanese investors, providing the volatility of investment return that suited the short-term nature of their investing style.

Table 2.10 Top 30 offshore fund managers in Taiwan (US$m) 23

Table 2.9 Asset split of offshore funds (% of total) 22

Asset class AUM (US$m) Weight

Fixed income 62,897 51.9%

Equity 38,843 32.1%

Balanced funds 18,366 15.2%

Money market 919 0.8%

ETFs 6 0.0%

Others 114 0.1%

AUM 121,144 100.0%

Rank Fund AUM

1 AB 26,365

2 Templeton 15,547

3 Allianz 13,861

4 JPMorgan 12,878

5 Fidelity 8,093

6 BlackRock 7,621

7 Amundi 7,155

8 NN 4,189

9 Schroders 4,166

10 PIMCO 3,595

Rank Fund AUM

11 Baring 2,058

12 UBS 1,906

13 Neuberger Berman 1,781

14 Eastspring 1,736

15 Investec 1,372

16 Morgan Stanley 1,317

17 Aberdeen Standard 1,300

18 Invesco 948

19 BNPP 548

20 Janus Henderson 535

Rank Fund AUM

21 MFS 513

22 HSBC 454

23 Merian 447

24 T. Rowe Price 399

25 PineBridge 369

26 Legg Mason 347

27 Nomura 295

28 Pictet 139

29 Natixis 133

30 Vontobel 131

52%

32%

15%

1%


Table 2.11 Top offshore funds by sales in 2019 24

Offshore fund Market share

AB Global High Yield Portfolio 11.7%

Allianz Income and Growth 10.5%

Templeton Emerging Markets Bond Fund 5.2%

AB American Income Portfolio 4.4%

Amundi Funds Emerging Markets Bond 3.4%

JPMorgan Global High Yield Bond Fund 2.2%

NN(L) Emerging Markets Debt Hard Currency 1.9%

JPMorgan Global Income Fund 1.7%

BlackRock World Mining Fund 1.5%

Templeton Global Bond Fund 1.5%

Top 10 Funds 43.9%

Top 15 Funds 48.9%


Chart 2.12 Local vs offshore AUM (US$bn) 25

91

Local fund Offshore fund

2013 2014 2015 2016 2017 2018

84

104

2019

78

117

66

95

67

93

62

105

66

91

133121

As can be seen from the chart above, over the last few years, the market has seen a swing in favour of the use of offshore funds by local investors, despite ongoing restrictions from the FSC. However, in 2019 this was reversed by the substantial increase in use of TDF and ETF, both issued by locally-domiciled fund houses.

91

Chart 2.13 Taiwan mutual fund AUM by domicile 26

Domestic International

42%

58%

37%

63%

42%

58%

41%

59%

40%

60%

45%

55%

2013 2014 2015 2016 2017 2018 2019

52%

48%

13 SITCA/Keystone Intelligence, December 2019 (figures exclude institutional mandates). Please note the exchange rate used (NTD to USD) was that applicable at the end of each year shown

14 SITCA/Keystone Intelligence, December 2019.





19 Dealogic data, December 2018.

20 Citi and market sources.



23 TDCC/Keystone Intelligence, December 2019.




19Markets and Securities Services | Taiwan Mutual Funds 2020

Table 2.14 Ranking of all Taiwan SITE and SICE

Rank Name of Fund InstitutionOffshore Fund AUM (US$mn)

Onshore Fund AUM (US$mn)

Subtotal (US$mn)

Market Share

1 AB SITE 26,365 2,362 28,727 11.3%2 Templeton 15,547 2,823 18,370 7.2%3 Yuanta SITE 18,340 18,340 7.2%4 Allianz SITE 13,861 3,821 17,682 7.0%5 JPMorgan SITE 12,878 3,423 16,300 6.4%6 Cathay 1,472 12,809 14,281 5.6%7 Capital SITE 12,392 12,392 4.9%8 Fuh Hwa SITE 9,600 9,600 3.8%9 Fubon SITE 48 9,268 9,316 3.7%10 Nomura SITE 5,861 3,228 9,089 3.6%11 Fidelity SITE 8,093 372 8,465 3.3%12 CTBC SITE 133 7,658 7,791 3.1%13 BlackRock SITE 7,621 105 7,725 3.0%14 Amundi SITE 7,155 494 7,649 3.0%15 Schroders SITE 4,166 2,138 6,303 2.5%16 KGI SITE 6 5,622 5,627 2.2%17 Eastspring SITE 1,867 3,258 5,125 2.0%18 PineBridge SITE 882 4,165 5,047 2.0%19 Invesco SITE 948 3,215 4,163 1.6%20 PIMCO SICE 3,595 3,595 1.4%21 First SITE 74 3,390 3,464 1.4%22 Taishin SITE 3,114 3,114 1.2%23 Mega SITE 3,069 3,069 1.2%24 Jih Sun SITE 2,600 2,600 1.0%25 Prudential SITE 115 2,441 2,556 1.0%26 Shin Kong SITE 53 2,473 2,526 1.0%27 Uni-President AMC 2,449 2,449 1.0%28 Baring SICE 2,058 2,058 0.8%29 Neuberger Berman SITE 1,781 270 2,051 0.8%30 UBS SITE 1,906 134 2,040 0.8%31 Aberdeen Standard Inv. 1,300 380 1,680 0.7%32 TCB SITE 0 1,485 1,485 0.6%33 Hua Nan SITE 1,202 1,202 0.5%34 HSBC SITE 454 738 1,192 0.5%35 Manulife SITE 148 1,036 1,184 0.5%36 SinoPac 49 1,049 1,049 0.4%37 Union SITE 970 970 0.4%38 BNPP SICE 548 548 0.2%39 Janus Henderson SICE 535 535 0.2%40 UOB SITE 117 371 488 0.2%41 Capital Gateway SICE 447 447 0.2%42 Marbo SICE 399 399 0.2%43 DWS SITE 46 327 373 0.1%44 Legg Mason SICE 347 347 0.1%45 JKO AMC 281 281 0.1%46 Taichung Bank SITE 147 147 0.1%47 Pictet SICE 139 139 0.1%48 UBP SICE 64 64 0.0%49 Concord SICE 44 44 0.0%50 Ezfunds SICE 23 23 0.0%51 Sinopro SICE 0 0 0.0%

Total 121,144 133,016 254,111 100.0%


a. How is distribution of funds in Taiwan achieved?Fund distributors and sub-distributors in Taiwan include local and global banks, SITEs, SICEs, securities companies, insurance companies and other financial advisers. Given the broad reach of branch networks across the island of Taiwan, banks represent a significant majority of the volume of funds sold. Most banks maintain restricted lists of managers and funds they’re willing to distribute, often after undertaking due diligence and compliance checking, and ensuring the fund fits within their platform. Some of the local banks in Taiwan also have their proprietary range of funds, which may get priority when seeking shelf space. In 2019 sales of mutual funds via ILAS products mushroomed greatly, in part due to the success of TDF. This can be expected to grow some more in 2020.

CHAPTER 3. DISTRIBUTION DYNAMICS

Table 3.2 Top distributors of mutual funds 28

Local banks Insurance companies Global/international banks

CTBC Cathay Life Citibank

E.Sun Commercial Shin Kong Life Standard Chartered

Cathay Cardif Life UBS

First Fubon Life HSBC

Bank of Taiwan Allianz Life BNPP

Fubon Taiwan Life ANZ

Mega International China Life DBS

Hua Nan Mercuries Life Deutsche

Taiwan cooperative Chubb Life

Taishin PCA

Chart 3.1 Taiwan mutual fund sales percentage by distribution channel 27

Bank trust Individuals Insurance Bank Assurance Corporations Others

2015 20172014 2016 20192018

91

32.8%

8.7%

30.5%

13.7%

6.4%

7.9%

29.7%

8.2%

26.5%

15.9%

8.0%

11.6%

32.3%

9.6%

26.6%

14.3%

8.2%

9.0%

33.7%

9.3%

24.4%

11.3%

12.0%

9.3%

35.2%

13.1%

24.8%

9.6%

11.4%

5.9%

33.7%

21.5%

18.1%

8.6%

10.7%

7.3%

Markets and Securities Services | Taiwan Mutual Funds 2020

Insurance companies represent around 29% of fund sales when combining sales of funds and unit-linked insurance policies. They’re taking a greater market share, as their sales forces increase in size and gain more confidence in using mutual fund products. Many sales are made in conjunction with investment-linked assurance schemes (ILAS), which continue to increase in popularity.

A number of fund companies, mainly those regarded as SITEs, also make direct sales of funds to both retail and institutional investors. This has become a less important area of development in recent years, as the other major distribution groupings increase their volume and provide more consistency of sales.

Typically, most bank sub-distributors engage with their fund company partners to hold “in-branch” roadshows and other promotional activities to introduce their funds and the portfolio manager to prospective customers. This can often prove to be very time-consuming in the early stages. But after regular, usually quarterly or half-yearly road-show presentations, successful managers stand to gain ample reward.

To enable adequate Island-wide coverage, the major fund managers have had to gear up their numbers of “wholesalers”, i.e. sales staff, to service the multiple bank branches and distributors in the market. Typically, the larger companies will have around 12 to 15 such staff on average, whereas the same companies in their Hong Kong or Singapore offices have significantly lower numbers of wholesalers, as market coverage is geographically easier.

Due to a slowdown in the ability to introduce new funds to the market, “hot” or “flavour-of-the-month” type of fund promotions, similar to IPO-type promotions, no longer occur.

21

Yuanta SITCYuanta SITC have become the largest local Taiwanese-owned fund management business. Their slogan: “Global Reach, Local Touch” seems to reflect their market positioning quite well. The vast majority of the assets raised have been from ETFs, they are the largest provider with 48 ETFs, and have benefited from a substantial flow into ETFs in Taiwan during 2019.

Yuanta has successfully targeted the retail market in Taiwan for ETFs, and claim over 600,000 retail investors in their funds. This has been achieved through a variety of marketing methods, including holding more than 1,000 client seminars a year, use of social media and the issue of various ETF guide books in both Chinese and English. A key objective from their sessions has been to teach end-investors about how to select funds, about fees and charges and how to create an investment strategy to suit their needs. This education process certainly seems to have paid dividends for them, as they have seen great success with new ETF launches during the last few years.

They were the first Taiwanese manager to launch leverage/inverse ETFs, and have, as a result, formed cooperation agreements with fund managers in other locations, including Hong Kong, Singapore, Thailand and Malaysia, thus seeking to grow their business beyond Taiwan.


b. Distribution dynamicUnlike onshore funds, the most common way for offshore fund managers to tap into the Taiwan market is to appoint a “Master Agent” to distribute offshore funds to retail clients. Table 3.3 summarises the fund distribution mechanisms in Taiwan.

c. Types of products allowedA significant majority of the offshore funds sold in Taiwan are either Luxembourg or Dublin UCITS products. The FSC has accepted the UCITS regulations as being equivalent to its own and thus doesn’t try to reinvent the wheel when reviewing these products for the Taiwan market. However, in the last five years, the FSC has become increasingly concerned that there’s a proliferation of offshore fund products, and so it has sought to impose additional restrictions on those seeking to enter the market, both in terms of individual funds and the investments they make.

Furthermore, except where a fund manager qualifies under The Deep Cultivation Plan, it has slowed down the approval processes considerably, by restricting each Master Agent to a one-fund-at-a-time policy, thus Master Agents can’t apply for multiple fund approvals, whether for a single fund house or for multiple fund houses, if they represent more than one. This has led to many offshore fund managers choosing to set up their own Master Agent businesses rather than rely on third-party firms. Reports from the market indicate the time frame over which approval is given for new funds has also been greatly extended, exceeding six to nine months in many instances, even where the new product might be an additional sub-fund of an existing umbrella vehicle.

Clearly, fund managers wanting to add to their existing product range on offer in Taiwan need to consider very carefully which will be the most suitable, given the possible time delay to market and their inability to add multiple funds at the same time.

KGI SITEKGI SITE are a recent Taiwanese-owned entrant to the fund management industry. They are part of the same group that has a substantial brokerage business, thus this seems like an appropriate development. Whilst the SITE business actually started around 20 years ago, it has been as a result of a new and experienced management team brought into the business that they have begun to build a strong franchise.

An initial target has been to create and develop a range of ETFs to meet the recent market demand for fixed income and high yield products. In 2019 they launched seven ETFs, each as an Initial Public Offering (IPO) in style. More are planned for 2020. As they are not directly owned by a life insurance company, they have benefited from this independence, thus been able to gather assets from multiple sources, such as banks, insurance as well as retail investors. Primary fund focus has been on high yield and dividend paying products.

It will be interesting to see how this business develops over the next few years, as they have clearly done their market research prior to recent launches and are greatly benefiting as a result.

FundRichDuring 2019, FundRich went through further transformation, and have come out a stronger more competitive business. They too have brought in new management which has enabled them to provide a better focus for the business on building an online funds distribution platform. By the end of 2019, they reported more than 120,000 clients with assets exceeding US$1billion.

FundRich has firmly positioned itself as the “go to” location for mutual fund investors. They have embarked on a large education campaign to teach investors about charge structures, commissions paid, asset allocation and portfolio planning and regular savings. Possibly due to their ownership (by the Taiwan Depository & Clearing Corporation (TDCC) together with 34 local and global fund houses, they can afford to take a different approach to fund distribution than that of the major banks in Taiwan.

Their pensions development has achieved 110,000+ members, although less than half that number are said to be “active”. Since it was launched in April 2019, it has begun to gather assets steadily through monthly subscriptions now exceeding US$10m per month. There are 9 mutual funds on their list from a selection of fund houses. They aim to grow this development expect to undertake a full review before the end of two years after launch.


Table 3.3 Fund distribution summary 29

Type Participants Role Eligibility Status

Offshore Fund

Master Agent • A Master Agent is required if funds are sold to general public.

• One Master Agent may represent one/more offshore fund managers.

• Master Agent is responsible for filing applications with SITCA, which shall review and forward it to the FSC for approval.

SITEs, SICEs and securities brokers.

There are 39 SITEs and 16 SICEs representing 69 offshore fund managers as Master Agents.

Sub-distributor • The Master Agent may mandate sub-distributors for fund distributions.

• A sub-distributor may be mandated to sell multiple funds.

SITEs, SICEs, securities brokers, banks and trust enterprises.

Up to 80% of fund distribution is by banks and financial services firms.

Private placement agent

• A private placement agent is required when an offshore fund manager wants sell funds to sophisticated investors, institutions and funds via private placement.

• A private placement agent is optional when an offshore fund manager wants to sell funds to banks, bills finance enterprises, trust enterprises, insurance companies, securities enterprises and financial holding companies via private placement.

• Private placement agent is required to conduct KYC checks and suitability evaluations of the sophisticated investors.

SITEs, SICEs, securities brokers, banks or trust enterprises.

Type Participants Role Eligibility Status

Onshore Fund

Sales distributor • SITE may mandate sales distributors for fund distribution to investors

2 SITEs, SICEs, securities brokers, banks, trust enterprises, and insurance companies.

Private placement agent

N/A N/A


Local funds are generally dealt with very promptly by the FSC. This is designed to help develop local fund companies. A few of the global fund managers with a local SITE licence have begun to build their local product ranges. Where they have, however, the FSC has rewarded them with a faster-track processing of offshore fund registrations.

d. Restrictions on offshore fundsInevitably, the FSA has a number of restrictions it imposes on offshore funds seeking to be distributed in Taiwan. These are mainly designed to ensure offshore funds don’t have investment-related advantages over domestic funds, and to ensure similarity in approach. These are summarised below.

e. Hedge and alternatives fundsThe FSC has generally restricted access by Taiwanese investors to hedge and alternatives funds sold on the island. Of course, many who have been able to establish overseas banking accounts with money held outside Taiwan may have had access via their private banking relationships. The Taiwanese regulators began allowing the development of offshore banking units (OBUs) by Taiwan banks, both local and global, from 2016/17. These are primarily aimed at high-net-worth individual (HNWI) investors, and through such accounts hedge and alternatives funds may be offered. Although this area hasn’t gathered substantial assets to date, there are reports of this potentially being allowed to become onshore for the HNWI and professional investors, those defined as having US$1m+ to invest.

Holding of derivatives• Non-offset “long” position should be less than 40% of offshore fund NAV.

• Non-offset “short” position should be less than correspondent securities current holding values.

• Investment in other assets, e.g. gold, commodities, real estate, is prohibited.

China market securities• Investment value should be limited to listed securities.

• Investment value should be less than 10% of the fund NAV.

Taiwan market investment• Securities investment value should be less than 70% of NAV.

• Taiwan investors holdings should be less than 50% of the fund NAV.

Fund self-related constraints• Fund should not be denominated in NT$ or RMB.

• Maintain one-year minimum prior track record for the fund.

• Evidence of public offering in “home” market.

• Custodian bank rating should be higher than BBB- (S&P).

• Investment of all investors in Taiwan in single offshore fund should be less than 50% of fund NAV.

Alliance Bernstein (AB)AB have been the most successful global fund manager in the Taiwan mutual fund market for a number of years. Their success has been well documented previously, and can be attributed to their range of fixed income, high yield and multi-asset funds, and a consistent above average performance track record.

AB has done well raising assets from both the local bank distributors as well as the global banks that operate in the Taiwan market. It has benefited from Taiwan’s Deep Cultivation Plan and has grown a substantial business with both offshore as well as onshore mutual funds.

Like competitor fund managers, it has been obliged to offer “B” shares in the market alongside the more typical “A” shares. As a result, it is also seeing Taiwan’s typically fickle investors becoming slightly longer term in their investment horizons than has traditionally been the case. Success has been cemented through a constant programme of distributor support activities, including bank branch visits, seminars and events, expert views and investing ideas, together with the wide-range of social media options available in Taiwan, all done in Chinese.


f. “B” sharesDuring the 1990s, many of the bank distributors of offshore funds in Taiwan and elsewhere in Asia actively selected to use “B” shares of the UCITS products offered, primarily because these yielded higher levels of commission rebates. But in time end-investors became aware of the disadvantages of “B” shares, particularly for active investment switching between fund managers, not using the funds from the same manager. So their use declined considerably. However, since 2015, “B” shares have returned to the Taiwan market for sales of UCITS products. Their use by distributors has been based on the notion that owning “B” shares of funds would make it more expensive to switch between fund managers, thus achieving greater retention of money in the same fund house, which, in turn, would lead to longer-term investing.

Around 30% of sales of UCITS funds are now said to be using “B” shares. Many leading fund houses initially refused to offer “B” shares, often owing to the uneconomic value they represent to end-investors, however, market demand and economics has forced most global firms to now offer “B” shares on their funds.

“B” shares are often compared to “A” shares and “C” shares, which are also share classes offered in open-ended mutual funds such as UCITS products for retail investors. These retail share classes charge varying sales loads that are structured by the mutual fund company and paid to sub-distributors. In addition to sales loads, investors will be charged operating expenses that are paid indirectly from the fund’s assets.

Typically, “B” shares have a back-end sales-load structure. Back-end loads can be static or as a CDSC (Contingent Deferred Sales Charge). With back-end load charges, an investor incurs a fee when they exit the fund. Fees are charged as a per cent of the transaction and paid to the intermediary.

Static back-end loads range from 1% to 4% and may be charged regardless of the holding period. CDSC back-end loads are charges that decrease over time. These sales loads can start at 4%, decreasing annually to zero over a specified time frame, usually five years. Sometimes “B” shares with expired back-end CDSCs may be reclassified to “A” shares, which offer investors the benefit of a lower annual expense ratio. Full details on a fund’s sales-load structure will be included in its prospectus.

As “B” shares are part of a retail share class, “B” share operating expenses may be subject to additional fees to compensate distributors for marketing and selling retail funds. These fees can often be higher for “B” shares since they don’t incur front-end loads but may have commission fees that decrease over time. As a result, “B” shares often charge one of the highest total expense ratios.

25


Nomura SITEThe Nomura SITE business in Taiwan has long been the go to place for global fund managers wanting to enter the Taiwanese market, and have their funds represented by an experienced third party Master Agent. Nomura have somewhat specialized in working with third party managers, they currently have four firms they act as MA for.

Their success has been built of the back of being somewhat selective about the funds they wish to promote, and then employing an experienced and well connected sales team to promote the funds via the major banks and financial services firms that are the key funds distributors in Taiwan. Their philosophy is to retain long-term strategic relationships with global fund managers and help them design suitable products and marketing strategies for Taiwan.

Among the reasons cited for their success have been the ability of Nomura to operate across all the distribution outlets, including banks, insurance companies and securities companies, to focus on product that meets the latest market demand and provide the required support for the fund house promotion.

In 2019, they saw big success with a South African Rand (ZAR) denominated High Yield Bond Fund, which was popular with those seeking high levels of income, especially insurance companies. The rationale being that if the fund yield (from ZAR) is between 15% and 18%, the investor can afford to see currency fluctuation of 10% to 12% and still have earned more than in US or Taiwan dollars.

Their own investment team is a unique differentiating competitive advantage as it manages regional strategies and global strategies from Taipei. This is the sort of team that its peers would have located in Hong Kong or Singapore. While the investment team is not directly involved in the sales of UCITs products, they are at the forefront in Taiwan with regards to commenting on global investment themes, issues and factors - to clients and to the media. This has helped build a strong image for the Company and trust in its ability to understand global markets from a Taiwanese perspective.

Nomura has indicated they remain open to represent more and new fund house entrants to the Taiwan market, but caution that success can only be achieved where the funds offered have a proven top rating past performance record and/or offer a niche play.


g. Portfolio financingA frequent form of investment advice used by private banks for their HNWI customers is to use portfolio financing to leverage investments to enhance either yields or overall returns. This, too, has, until now, been stopped in Taiwan, except for customers using OBU accounts. In 2019 a trial run onshore in Taiwan has occurred, allowing the use of finance to leverage portfolios, when done for HNWI customers of selected banks. As most of these portfolios have tended to use mutual funds, this has provided another boost to the industry.

27 TDCC/Keystone Intelligence.

28 Citi, Keystone Intelligence and Other Market Reports, December 2019.

29 Citi Integration, 2019.

30 Citi, December 2019.


Taiwan’s Regulations Governing Offshore Funds require offshore fund managers to appoint a single onshore Master Agent. The regulations require such Master Agents and sales organisations to provide prospective investors into offshore funds with copies of a prospectus and investor information factsheets. Securities Investment Consulting Enterprises (SICEs) as well as Securities Investment Trust Enterprises (SITEs) and other organisations are able to act as Master Agents for offshore fund management companies. Authorising a qualified domestic Master Agent, responsible for all business plans and executions within Taiwan, is essential for all offshore fund managers.

Over the last 10 years, many global fund managers established their own SITE businesses. However, care needs to be taken on whether this will prove to be the best route in building a fund management distribution business in Taiwan, especially for smaller, less committed organisations.

Recent years have seen a number of foreign-owned SITEs changed ownership. Often this has been a result of scale issues, the existing owner maybe failing to achieve economic size, selling to a new foreign owner perhaps with greater resources, wishing to enter the Taiwan market. This certainly provides a fast-track route to getting established, but often this doesn’t resolve the issue of scale, not without a strong line-up of funds to support the business.

a. Description of Master AgentsA Master Agent, in Taiwan, provides the function of being the local onshore representative for a fund manager unwilling or unable to set up their own business in Taiwan. A number of local and global organisations have created Master Agent businesses, usually offering a range of funds and manager choices. As at 31 December 2019, there were 40 (2013: 41) Master Agents registered, representing 1,005 offshore funds on behalf of 64 (2013: 75) offshore fund management companies. The list includes local and global firms, fund managers offering their own products only and securities companies offering a choice of managers and funds.

CHAPTER 4. MASTER AGENTS


b. Becoming a Master AgentMaster Agents can be one of the following registered and approved business types:

I. SICEs

II. SITEs

III. Securities brokers

IV. Fund management institutions

The qualifications necessary to become a Master Agent include having a paid-up capital of NT$70m, no legal or securities industry violations, and sufficient staffing resources to meet the FSC requirements.

Where a Master Agent represents a single offshore fund manager, an additional operating bond of NT$30m is required to be set up. If representing two offshore managers, the bond required is NT$50m; for three or more managers, NT$70m.

c. The role of Master AgentsTypically, the Master Agent acts as the offshore fund company’s representative in Taiwan and undertakes most aspects of the local listing and distribution on behalf of the fund(s), including:

I. Producing a Chinese translation and delivery to sub-distributors and investors of the Prospectus for each fund.

II. Acting as local agent for all servicing aspects, documents and correspondence.

III. Communicating with the offshore fund manager and handling all Taiwan transactions.

Ret

ail c

lient

sIn

stit

utio

nal c

lient

s

Figure 4.1 Ways to enter into the Taiwan mutual fund market 31

Institution marketMandates• Bid for discretionary investment mandates from

insurance companies or pension funds

Private placement• Appoint onshore private placement agent to find

institutional investors and sophisticated investors

Provide advisory services to SITEs• Provide sub-advisory services to SITEs (white labelling) • Structure fund of funds with SITEs

Retail marketSell existing funds to Taiwan investors• Mandate a SITE, SICE, securities broker to be Master Agent• Master Agent can mandate SITEs, with SICEs, securities

brokers, banks or trust enterprises as sub-distributors (sales agents)

• Sales offshore fund to investors

Private placement• Appoint onshore private placement agent to find

sophisticated individual investors

Counter parties End customers

Individual investors

Sub-distributorsMaster Agent

1

2

4

3

5

1

2

4

3

5

Pension funds and insurance

companies

Sophisticated investors*

(financial inst.)

Sophisticated Investors*

(individuals)

Private placement

agent

Sophisticated investors*

(entity/funds)

Private placement

agent

Offshore fund manager

SITEs

Mandates

Optional to have an agent

White labelling

1. For individuals, investor must have financial capacity >=US$1m, and have sufficient knowledge or trading experience in financial products.

2. For legal entities or mutual funds, investor must have total assets/AUM of US$1.6m.

3. Financial institutions includes banks, bill houses, insurance companies, securities houses, trust enterprises and financial holding companies.

4. Offshore fund managers need to file application to FSC five days after receiving subscription for private placement/direct sales.


Table 4.2 Listing of Master Agents and fund managers represented (US$m) 32

Master Agent Offshore funds represented No. of funds 2019 AUM

AB SITE AB 35 26,365

Templeton SICE Templeton 53 15,547

Allianz SITE Allianz 44 13,861

JPMorgan SITE JPMorgan 59 12,878

Fidelity SITE Fidelity 73 8,093

BlackRock SITE BlackRock 52 7,621

Amundi SITE Amundi 20 7,155

Nomura SITE NN Investec Nomura ROBECO 56 5,861

Schroders SITE Schroders 73 4,166

PIMCO SICE PIMCO 13 3,595

Baring SICE Baring 17 2,058

UBS SITE UBS 27 1,906

Eastspring SITE Eastspring Vontobel 55 1,867

Neuberger Berman SITE Neuberger Berman 6 1,781

Cathay SICE Morgan Stanley First State AXA 39 1,472

Aberdeen Standard SICE Aberdeen Standard 25 1,300

Invesco SITE Invesco 37 948

PineBridge SITE MFS PineBridge 36 882

BNPP SICE BNPP 37 548

Janus Henderson SICE Janus Henderson 26 535

HSBC SITE HSBC 26 454

Capital Gateway SICE Merian 11 447

Marbo SICE T. Rowe Price 12 399

Legg Mason SICE Legg Mason 24 347

Manulife SITE Manulife Edmond de Rothschild 22 148

Pictet SICE Pictet 20 139

CTBC SITE Natixis 11 133

UOB SITE UOB 16 117

Prudential SITE PGIM 2 115

First SITE Eurizon 9 74

UBP SICE UBAM 6 64

Shin Kong SITE Lion 13 53

Sinopac SICE Russell 9 49

Fubon SITE GAM 7 48

DWS SITE DWS 12 46

Concord SICE KBI Carmignac GAM (Lux) 7 44

Galaxy SICE Capital 9 23

KGI SITE BOCI-Prudential 1 6

Sinopro SICE AZ 3 0

TCB SITE BNY Mellon 2 0


d. The Taiwan Master Agents’ catch-22As described, the role of a Master Agent acting on behalf of an offshore manager is to effect sales and the local administration of offshore funds in Taiwan, through all distributors. A few Master Agents have been willing to represent multiple fund houses and use their well developed networks effectively to build assets.

For the offshore fund manager, while there does need to be a high degree of transfer of trust to the Taiwan Master Agent, this can prove to be a relatively efficient means with which to establish a presence, grow a business and learn more about the market, without also having to create the usual infrastructure a local presence would demand.

There are a number of instances where, as a result of successful asset raising by a Master Agent, the offshore fund house has subsequently chosen to open its own office, thus becoming its own Master Agent, inevitably replacing the incumbent.

Hence, Taiwan’s Master Agents’ catch-22!

This hasn’t been universally successful, though. There are also examples where an offshore fund house, having become its own Master Agent, has seen significant outflows of assets shortly thereafter. This can be for a variety of reasons, most often the lack of availability of suitable alternative products to suit the short-term investor habit during changing market cycles.

Quite clearly the success of a third-party Master Agent can often be as a result of having the right range of products and a balance of funds and fund managers represented. In an era where bringing new funds to the market is being highly restricted, it becomes increasingly important for offshore fund managers to work closely with their Master Agents. If the Master Agent represents multiple fund houses, it’s then in the invidious position of having to decide which fund/fund manager is most likely to succeed in raising most assets each time it applies to add a product to its roster.

31 Citi, December 2018. Note sophisticated investors include individuals, legal entity and funds.



Table 4.3 Top 30 Master Agents in Taiwan by AUM (US$m) 33

Rank Master agent AUM

1 AB SITE 26,365

2 Templeton SICE 15,547

3 Allianz SITE 13,861

4 JPMorgan SITE 12,878

5 Fidelity SITE 8,093

6 BlackRock SITE 7,621

7 Amundi 7,155

8 Nomura SITE 5,861

9 Schroders SITE 4,166

10 PIMCO SICE 3,595


11 Baring SICE 2,058

12 UBS SITE 1,906

13 Eastspring SITE 1,867

14 Neuberger Berman SITE 1,781

15 Cathay SICE 1,472

16 Aberdeen Standard SITE 1,300

17 Invesco SITE 948

18 PineBridge SITE 882

19 BNPP SICE 548

20 Janus Henderson SICE 535


21 HSBC SITE 454

22 Capital Gateway SICE 447

23 Marbo SICE 399

24 Legg Mason SICE 347

25 Manulife SITE 148

26 Pictet SICE 139

27 CTBC SITE 133

28 UOB SITE 117

29 Prudential SITE 115

30 First SITE 74

Target Date Funds/ Fixed Maturity ProductsAs had been forecast in early 2019, Target Date Funds (TDF) or Fixed Maturity Products, have seen a sharp rise in popularity in Taiwan. These have proven popular with both the fund companies issuing them, because of the implied longer term holding period, and with distributors, especially the life insurance companies, who have been using them as the investment link for their Investment-Linked Insurance Schemes (ILAS).

It is somewhat surprising, that the TDF have mainly been issued by major global fund houses operating in Taiwan, rather than local firms. Often they have raised assets in a similar fashion to an IPO listing, thus big success has been achieved on day 1 of the launch, with significantly lower amounts raised in subsequent weeks and months.

Most TDF are composed of a significant proportion invested in fixed income assets, with much lower levels in equities and other assets. Typically, TDF have a relatively short time frame, up to 6 years usually. This works well from the point of view of the fund houses, as there is an implication that investors’ will hold their TDF assets far longer than if they were in traditional equity or fixed income funds.


a. The Deep Cultivation Plan The Plan was introduced by the FSC in 2013 to encourage global fund managers who had a somewhat dominant presence in Taiwan to start building a local presence, with local staff managing local and global assets. In return for adhering to and delivering on a number of “local commitments”, the FSC would then provide incentives, under a type of pick-and-mix approach.

The Plan is reviewed annually by the FSC to assess the results achieved under the three main categories. Subject to these, eligible fund managers may select which incentives meet their business requirements for the following year.

CHAPTER 5. AN EVOLVING REGULATORY ENVIRONMENT

FROM COMMITMENTS TO INCENTIVES

LOCAL COMMITMENT (1 CRITERIA) Either A: Comply with a minimum number of locally hired staff. Or B: Establish a full service local presence.

LOCAL INDUSTRY CONTRIBUTION (4 CRITERIA) 1. AUM for mandated/advisory services provided by SITE (type A) or local Master Agent

(type B) ranks in the top third of local market AUM.

2. AUM of offshore funds with investment advice by Taiwan SITE exceeds a set threshold (determined by FSC).

3. Fees paid to a SITE (type A) or revenue of local Master Agent (type B) rank in the top half of local market, by operating revenue.

4. Investment in local SITE exceeds NT$4bn (US$130m), with annual increases.

GROW LOCAL TALENT (3 CRITERIA) 1. Three or more local hires in addition to overseas staff in year one.

2. Meaningful contribution to local marketing training.

3. Development of local talent.

INCENTIVES FOR FUND MANAGERS UNDER PLAN

• Allowed to submit up to three offshore funds for approval at any one time.

• May introduce new types of funds to the Taiwan market.

• Faster approvals given for offshore funds seeking FSC approval.

• Where a fund includes use of derivatives, faster approval also.

• Where a fund has investment in Mainland China securities, a higher permission of up to 40% may be given.

• A reduced number of product analysts required for the Taiwan Master Agent of fund managers.

• A reduced number of Master Agent staff required to service sub-distributors.

Source: FSC, 2019.


In 2019, nine global fund managers achieved sufficient criteria under the Plan to be eligible to select one incentive. Of these managers, five achieved four or more criteria and thus could choose two of the incentives. All managers successfully achieving one or more of the criteria can also have their AUM from Taiwan investors in offshore funds of up to 70% (currently 50%) for one year for the period from 1 October 2019 to 30 September 2020. The table below shows the successful managers and the benefits/incentives selected under the Plan. These are valid for the period 1 October 2019 to 30 September 2020.

b. The 70% ruleUntil 2014, the FSC had imposed a requirement that Taiwanese investors in offshore funds couldn’t exceed 70% of the funds’ assets by value. In November 2014, the FSC gave notice of a reduction in this restriction to not exceed 50% of AUM, with effect from 1 January 2016. It was estimated some 20 to 25 offshore (UCITS) funds offered in Taiwan may have been caught by this restriction. Given the success in Taiwan that a small number of global fund houses were achieving, this change also had the effect of strongly encouraging the global fund houses to seek greater sales volumes of their most successful Taiwan-offered funds in other markets where they may also have been on offer in order to counterbalance their success in Taiwan.

An alternative that the impacted managers could also adopt was to create replica versions of these successful funds within their local SITE, which allowed them to be seen to be supporting local developments.

c. Online distributionOnline fund distribution in Taiwan hasn’t yet taken off. While there remain some regulatory restrictions on what may be done, these have been reduced in recent years, with a view to making a greater choice available to local retail investors. Only a few online fund distributors have set up and are offering products via their service. One of these, FUNDRICH, is well supported by the TDCC and TPEx and has 34 fund managers as additional shareholders. The other two providers, i.e. EZ Fund and Anue Fund are beginning to establish themselves but are still some way short of becoming significant distributors, when compared to the local banks.

Opportunities for “financial disruption” in the mutual fund industry, whether in terms of the funds offered or in the distribution of them, are very limited, and the industry believes this will remain for some time due to the regulatory environment, which has made such disruption seen elsewhere more difficult in Taiwan.

Global SITE Benefit/incentive 1 Benefit/incentive 2

Alliance Bernstein SITE (AB) Introduce new fund types Faster fund approvals

Allianz Global Investors SITE Introduce new fund typesAbility to submit more products for approval at one time

Fidelity International SITE Introduce new fund types Not eligible

Franklin Templeton Investments SITEAbility to submit more products for approval at one time

Not eligible

JP Morgan AM SITE Introduce new fund types Not eligible

Schroders SITE Introduce new fund typesHigher allowance for taking exposure to Mainland China securities

NN Investment Partners Introduce new fund types Not eligible

UBS Asset Management Introduce new fund typesHigher allowance for taking exposure to Mainland China securities

Invesco Introduce new fund typesHigher allowance for taking exposure to Mainland China securities

Source: FSC, 2019.


a. Greater China opportunities Taiwan is anxious to be seen as a major business partner for China. It already has one of the largest inward investments to that market — manufacturing. It’s said there are more than two million Taiwanese people now working and/or living in China, involved in many different businesses. The past political differences remain, but both sides are seen to want to work together.

It’s understood that the FSC adopts a “China-is-for-Taiwan” policy as far as the asset management industry is concerned. This, in effect, means that only Taiwan-owned fund managers can offer 100% China-invested funds to Taiwanese investors, and they’ll need to do so via domestic funds. Foreign fund managers wishing to use their China expertise are restricted, and need to qualify under The Deep Cultivation Plan to gain allowance to increase the proportion that China represents in any fund offered in Taiwan. In January 2019, the FSC announced an increase from 10% to 20% in the maximum normal proportion an offshore fund may invest into Mainland China securities. Already, with the advent of 100% foreign-owned Fund Management Company (FMC) licenses in China, a number of global firms are making use of their Taiwanese businesses to gear up with staff who can be transferred to China when the time arises.

b. Pension reform can fuel the growth of local SITEsThe retirement system in Taiwan is still developing. Despite it being one of the first in Asia to achieve nearly 100% coverage for all citizens, the terms were relatively modest. Many plans remain underfunded. Due to widespread concerns about inadequate retirement savings, many Taiwanese are active in creating their own pool of accumulated savings, usually via mutual funds.

CHAPTER 6. WHAT FUTURE OPPORTUNITIES ARE THERE?

Taiwan's aging society fuels savings

Increased longevity and declining birth rates have led to an increase in the median age of Taiwan.

As the general population has aged, savings (the gross national savings rate less the sum of government, business and household savings) has increased to prepare to meet retirement costs.

Household savings regularly make up nearly 66% of gross national savings.

While savings have increased, the rate of domestic capital investment hasn’t kept pace, with the savings rate in excess over investments reaching 12% in June 2018, resulting in a growing pool of idle funds.34

These funds represent a potential source of growth for financial markets as the funds require return.


There continue to be further developments to encourage a greater number of individual pension plans, which could include greater use of defined contribution schemes. Of these, “Member Choice Pensions” is most likely to succeed and has the support of the government to proceed.

The initial intention of this is to offer products with multiple fund options, offering a wide choice of stock markets into which they may be allowed to invest and include use of TDFs designed for the retirement market. Until now, this development has been slow to come to fruition. During 2019 the first rollout of products occurred following final government approval. FUNDRICH (see above) received a two-year exclusive opportunity to provide a pilot scheme for members of the Labor Pension Fund.

c. Institutional fund managementThere are five major “national” pension schemes — Labor Pension Fund (Old), Labor Pension Fund (New — 2005), Public Service Pension Fund, Labor Insurance Fund and National Pension Insurance Fund — each of which outsources part of its assets to international fund managers.

Table 6.1 AUM of five Taiwan pension funds at 31 December 2019 35

AUM (NT$bn) AUM (US$bn)

Labor Pension Fund — New 2,444.8 81.2

Labor Pension Fund — Old 942.5 31.3

Labor Insurance Fund 741.0 24.6

Public Service Pension Fund 595.8 19.8

National Pension Insurance Fund 369.3 12.3

Total 5,093.4 169.2

It’s estimated that up to 50% of the AUM of these pension funds has been allocated to global or overseas securities, with a high proportion as third-party mandates with foreign fund managers, investing into equities, global bonds and fixed income, hedge funds, absolute-return funds and other alternatives funds. Recently some allocation has occurred to ESG and private equity mandates, too.

Chart 6.2 Taiwan’s five major pension funds’ growth (US$bn) 36

20132011 2015 2017 201820142012 2016

7886

98

111121

134146

180

160

140

120

100

80

60

40

20

0

Public Service Pension Fund

National Pension Insurance Fund

Labor Insurance Fund

Labor Pension Fund (New)

Labor Pension Fund (Old)

157

2019

169


34 https://www.ceicdata.com/en/indicator/taiwan/gross-savings-rate. Savings rate 32.2% vs investment rate 20.3%.

35 Government Service Pension Fund, Bureau of Labor Fund (US$1 = NT$30), 31 October 2018.

36 Government Service Pension Fund, Bureau of Labor Funds, 2011 to 2018.

37 BLF/PSPF/Keystone Intelligence, December 2019.

38 BLF/PSPF/Keystone Intelligence, December 2019.

Table 6.3 Delegation weight in government funds (in US$bn)37

Government funds Global mandates Domestic mandates Total

Labor Pension Fund 34.8 11.1 81.2

Labor Retirement Fund 12.1 3.8 31.3

Public Service Pension Fund 6.6 1.9 19.8

Labor Insurance Fund 8.0 0.8 24.6

National Pension Fund 3.2 0.9 12.3

Table 6.4 Taiwan delegated mandate market by asset size and mandate no.38

Factor Asset type December 2019

Changes in past three years

1Y 2Y 3Y

Size (US$bn)

Global mandates 69 15 14 28

Domestic mandates 55 (2) 5 14

Total 124 12 19 41

Factor Asset type December 2019

Changes in past three years

1Y 2Y 3Y

Mandate No.

Global mandates 163 8 11 38

Domestic mandates 702 (100) (152) (646)

Total 865 (92) (141) (608)


Taiwan’s mutual funds market provides a wide range of opportunities for fund managers willing and able to enter the market. As it’s significantly larger than either Hong Kong or Singapore, and as it continues to provide an open-door policy for the entry of offshore funds, global fund managers seeking to expand into the Asian region should carefully consider how best they can participate.

As stated earlier, Taiwan has in the past adopted a cloak of mystery about its mutual funds business, but this has changed. Furthermore, Taiwan has a prime position in the line-up for participation in the (Mainland) China fund management business, not just because of its geographic proximity, but also because of the common language and familiarity it shares with many of the cultural and attitudinal issues that are prevalent.

SUMMARY

Keystone Intelligence Inc. is a Taiwan based financial advisory and market research consulting company focusing on the asset management industry. Established in September 2009 by Donna Chen, founder and managing director of Keystone Intelligence, it has successfully completed several M&A transactions by providing financial advisory services to international and local asset managers. It also offers tailor-made and standard market research services covering offshore funds, onshore funds, delegated mandates and government pension funds, institutional investing in mutual funds and asset management industry annual review and operating results assessment to global and local managers.

KEYSTONE INTELLIGENCE INC.

Stewart Aldcroft is a managing director and senior adviser in Citi’s Markets and Securities Services business, based in Hong Kong. He is also the chairman of Cititrust Limited, which provides trustee and fund administration services for unit trusts, ETFs and approved pooled investment funds in Hong Kong. He has been based in Hong Kong since 1985, and has held a number of senior leadership roles in various leading fund management companies.

ABOUT THE AUTHOR . . .

Markets and Securities Services | Taiwan Mutual Funds 2020 38Markets and Securities Services | Taiwan Mutual Funds 2020 38

Citi established its first branch in Taiwan in 1965. Citibank is the largest foreign name bank in Taiwan, providing a full suite of banking services including: corporate banking, consumer banking and private banking. Citi Taiwan is the leading provider of securities and fund services in Taiwan with the largest volume of assets under custody. We are top-rated in various industry surveys and are a leading player in market advocacy with active communication with regulators and infrastructures for market developments. For more information, contact Hsiao-Chi Wang at [email protected].

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Long term: A- (twn) Short term: F1+ (twn)

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0.1


GLOSSARY

LINKS

AUM Assets under management

CAGR Compound annual growth rate

CDSC Contingent deferred sales charge

CSRC China Securities Regulatory Commission

Distributor Usually a SITE or Master Agent

ESG Environmental, social, governance

ETF Exchange traded funds

FSC Taiwan Financial Supervisory Commission

Hong Kong SFC Securities and Futures Commission of Hong Kong

ILAS Investment-linked assurance schemes

R.O.C. Republic of China (Taiwan)

RSP Regular savings plans

SICE Securities Investment Consulting Enterprise

SITCA Securities Investment Trust and Consulting Association of the R.O.C.

SITE Securities Investment Trust Enterprise

Sub-distributor Usually a bank or SICE or other financial services business

TDCC Taiwan Depository and Clearing Corporation

TDF Target date funds

TPEx Taipei Exchange

TWSE Taiwan Stock Exchange

UCITS Undertakings for Collective Investment in Transferable Securities

SITCA www.sitca.org.tw

TDCC www.tdcc.com.tw

IMF www.imf.org/external/index.htm

Regulations www.selaw.com.tw

Directorate-General of Budget, Accounting and Statistics, R.O.C. www.dgbas.gov.tw

Keystone Intelligence Inc. www.kint.com.tw

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TAIWAN 2020 ASIA’S MUTUAL FUNDS GIANT